2022 (3) TMI 1119 - AT - Income Tax

Penalty levied u/s 271(1)(c) - deduction u/s 80P(2)(a)(i) - AO disregarded the contention of the assessee by observing that the explanation 1 to section 271(1) the Act is a deeming provisions which cast duty on the assessee to offer an explanation to the effect that it has not furnished inaccurate particulars of income - whether the assessee has furnished inaccurate particulars of income with respect to the interest income from the nationalized bank by claiming the deduction under section 80P(2)(a)(i)? - HELD THAT - Assessee under the bona fides believe has claimed the deduction under section 80P(2)(a)(i) of the Act with respect to the interest income as discussed above. It is also pertinent to note that the assessee has claimed before the learned CIT (A) that it was allowed deduction under section 80P(2)(a)(i) of the Act with respect to the interest income from the nationalized bank with respect to the assessment years up-to 2011-12. Claim of the assessee at the most can be regarded as inaccurate claim which cannot be equated with the furnishing inaccurate particulars of income. It is for the reason that nothing has been brought on record by the authorities below suggesting that the assessee has furnished the particulars of income with dishonest intent. As regards the explanation 1 to section 271(1)(c) of the Act, there was no iota of evidence suggesting that the explanation offered by the assessee was false. Thus the claim of the assessee cannot be said amounting to concealment of particulars of income. Likewise, there was no finding of the authorities below qua the fact that the assessee fails to substantiate the explanation offered by him and fails to prove that such explanation is bona fides with respect to material facts relating to the computation of total income. Thus in our considered view the provisions of explanation 1 to section 271(1)(c) of the Act cannot be attracted in the given facts and circumstances. In view of the above and after considering the facts in totality, we set aside the finding of the learned CIT (A) and direct the AO to delete the penalty levied by him under section 271(1)(c) of the Act. Hence the ground of appeal of the assessee is allowed.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act for inaccurate particulars of income.

Analysis:
1. The primary issue in this case is whether the assessee furnished inaccurate particulars of income by claiming a deduction under section 80P(2)(a)(i) of the Act for interest income from a nationalized bank. The Assessing Officer (AO) disallowed the deduction, leading to penalty proceedings under section 271(1)(c). The AO contended that the claim was inaccurate, resulting in the penalty.

2. The assessee argued that the claim was not equivalent to furnishing inaccurate particulars of income and that the penalty proceedings should be dropped as no specific charge was made by the AO. The contention was disregarded by the AO and upheld by the Commissioner of Income Tax (Appeals) (CIT (A)), leading to the appeal before the Appellate Tribunal.

3. The Tribunal analyzed the term "inaccurate particulars" and referred to relevant case law to determine if the assessee acted with a dishonest intent. The Tribunal highlighted that the claim being disallowed did not necessarily imply furnishing inaccurate particulars of income. It emphasized the need for a deliberate act or omission by the assessee to establish inaccurate particulars.

4. Further, the Tribunal examined Explanation 1 to section 271(1)(c) of the Act, which deals with deemed concealment of income. It differentiated between situations where the assessee fails to offer a genuine explanation or fails to substantiate it. In this case, the Tribunal found no evidence suggesting the explanation was false or lacked bona fides, thus concluding that the penalty provisions were not applicable.

5. Considering the facts and circumstances, the Tribunal set aside the CIT (A)'s decision and directed the AO to delete the penalty under section 271(1)(c) of the Act. The Tribunal emphasized that the claim, even if wrong, did not amount to furnishing inaccurate particulars of income or concealment of income, as there was no dishonest intent or deliberate misleading by the assessee.

6. Ultimately, the Tribunal allowed the appeal of the assessee, highlighting the importance of establishing conscious dishonesty or misleading intent to invoke penalty provisions under section 271(1)(c) of the Income Tax Act.